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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
ORDER
Per N. K. Saini, AM:
This is an appeal by the department against the order dated 23.11.2015 of the ld. CIT(A)-14, New Delhi.
Following grounds have been raised in this appeal: “The Assessing Officer, Asstt. Commissioner of Income Tax Circle 6(1), New Delhi is directed to file appeal in the above mentioned case before the IT AT, New Delhi on the following grounds of appeal:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO by reducing unabsorbed depreciation of 10B units from the profit of other exempted unit.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified in reversing the AO' s rejection of claim of the assessee regarding the set 2 Component Software Pvt. Ltd. off of losses of 10B units with non exempted income of such units.
3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”
3. From the above grounds, it is gathered that the main grievance of the department relates to the deletion of addition made by the AO by holding that unabsorbed depreciation/losses of two exempted units are to be reduced from the profit of one other exempted unit while arriving out the amount of exemption u/s 10B of the Income Tax Act, 1961 (hereinafter referred to as the Act) of the profit making unit.
During the course of hearing, the ld. Counsel for the assessee submitted that the issue under consideration is squarely covered by the earlier order of the ITAT Delhi Bench ‘D’, New Delhi in assessee’s own case in for the assessment year 2010-11. The aforesaid contention of the ld. Counsel for the assessee was not controverted by the ld. Sr. DR.
After considering the submissions of both the parties and the material on record, it is noticed that an identical issue has been adjudicated in favour of the assessee and against the department vide order dated 28.04.2017 in assessee’s own case in for the assessment year 2010-11 wherein the departmental appeal was dismissed by following the judgment of the Hon’ble Supreme Court in the case of CIT & Another Vs M/s Yokogawa India Ltd. in Civil Appeal No. 8498 of 2013 order dated 16.12.2016. The relevant findings have been given in para 12 of the said order dated 28.04.2017 which read as under:
3 Component Software Pvt. Ltd. “12. We have heard both the parties and perused the material available on record. The Hon'ble Supreme Court in case of Yokogawa India Ltd. held as under:- “15. Sub-section 4 of Section 10A which provides for pro rata exemption, necessarily involving deduction of the profits arising out of domestic sales, is one instance of deduction provided by the amendment. Profits of an eligible unit pertaining to domestic sales would have to enter into the computation under the head “profits and gains from business” in Chapter IV and denied the benefit of deduction. The provisions of Sub-section 6 of Section 10A, as amended by the Finance Act of 2003, granting the benefit of adjustment of losses and unabsorbed depreciation etc. commencing from the year 2001-02 on completion of the period of tax holiday also virtually works as a deduction which has to be worked out at a future point of time, namely, after the expiry of period of tax holiday. The absence of any reference to deduction under Section 10A in Chapter VI of the Act can be understand by acknowledging mat any such reference or mention would have been a repetition of what has already been provided in Section 10A. The provisions of Sections 80HHC and 80HHE of the Act providing for somewhat similar deductions would be wholly irrelevant and redundant if deductions under Section 10A were to be made at the stage of operation of Chapter VI of the Act. The retention of the said provisions of the Act i.e. Section 80HHC and 80HHE, despite the amendment of Section 10A, in our view, indicates that some additional benefits to eligible Section 10A units, not contemplated by Sections 80HHC and 80HHE, was intended by the legislature. Such a benefit can only be understood by a legislative mandate to understand that the stages for working out the deductions under Section 10A and 80HHC and 80HHE are substantially different. This is the next aspect of the case which we would now like to turn to.
From a reading of the relevant provisions of Section 10A it is more than clear to us that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. This is also more than clear from the contemporaneous 4 Component Software Pvt. Ltd. Circular No. 794 dated 9.8.2000 which states in paragraph 15.6 that, “The export turnover and the total turnover for the purposes of sections 10A and 10B shall be of the undertaking located in specified zones or 100% Export Oriented Undertakings, as the case may be, and this shall not have any material relationship with the other business of the assessee outside these zones or units for the purposes of this provision.”
If the specific provisions of the Act provide [first proviso to Sections 10A(1); 10A (1A) and 10A (4)] that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous Circular of the department (No.794 dated 09.08.2000) understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression “total income of the assessee” in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression “total income of the assessee”. In Section 10A as ‘total income of the undertaking’.
For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the state of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the state of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly.”
5 Component Software Pvt. Ltd. Thus, the issues contested in the present appeal are squarely covered by the Hon’ble Apex Court decision in case of Yokogawa India Ltd. as Section 10A as well as Section 10B of the Income Tax Act, 1961 are provisions relating to deduction. The CIT(A) has rightly held that the unabsorbed depreciation of one eligible unit cannot be adjusted with the profit of the other eligible unit, while calculating the deduction available to the other eligible unit under Section 10B of the Act. The CIT(A) has also rightly rejected the contention of the assessee that such unabsorbed depreciation should be set off against the income of the assessee under the head “Income from other sources”. Such unabsorbed depreciation of Section 10B eligible unit can only be carried forward and set off only after the tax holiday period is over. There is no need to interfere with the order of the CIT(A) as per the decision of the Apex Court.”
So, respectfully following the aforesaid referred to order dated 28.04.2017, we do not see any merit in this appeal of the department.
In the result, the appeal of the department is dismissed. (Order Pronounced in the Court on 12/06/2018)